TUI Travel leads U.K. benchmark higher

Inmarsat under pressure as investor sells stake

SimonKennedy

LONDON (MarketWatch) — Holiday company TUI Travel helped lead the U.K.’s main index to a sharply higher close Tuesday after a strong trading update.

The benchmark FTSE 100 index (UKX) rose 1.4%, or 79.79 points, to settle at 5,635.76, while other European markets also rebounded after six sessions of losses for the region. Also see Europe Markets.

U.K. shares also got some support from data on the country’s services sector, which showed a pick up in the pace of activity in September, helping to ease worries about a double-dip recession. See story on U.K. PMI data.

Shares in TUI Travel (TT.) jumped 4.2% after its well-received trading update. The group said the collapse of several smaller travel companies and airlines resulted in customers choosing to book their holidays with the bigger operators.

It added that net debt will also be lower than previously expected, due to strong working capital.

Commerzbank analyst Johannes Braun said the update is clearly encouraging, especially after the company warned as recently as August that austerity measures in Europe, and in particular the U.K., were hurting tourism demand.

Retail giant Tesco PLC (TSCO) had a see-saw session after beating first-half profit expectations and finished 0.2% higher, but still underperformed the benchmark index. Read story on Tesco’s first-half profit

While most U.K. stocks were trading comfortably in the green, there were still a few heavy decliners, including Inmarsat (ISAT), which dropped 4% to 629 pence a share after major shareholder Harbinger Capital said it had roughly halved its holding in the company.

Harbinger, which had said on Monday it was reviewing its options for the business, sold a 14.1% stake for 630 pence a share, or 410 million pounds ($648 million) in total.

Analysts at Morgan Stanley said the sale creates the risk that Harbinger will further reduce its stake in the business.

The broker added, however, that the proceeds from the sale could eventually return to Inmarsat, as the money may be used to roll out Harbinger’s 4G wireless network in the U.S., which has inked a deal to lease certain radio frequencies from Inmarsat.

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